NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
In June 2016, the FASB issued ASU
2016-13, Financial Instruments Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU presents new methodology for calculating credit losses on financial
instruments (e.g. trade receivables) based on expected credit losses and expands the types of information companies must use when calculating expected losses. This ASU is effective for annual periods beginning after December 15, 2019 and
interim periods within those annual periods, with early adoption permitted. The Company is currently evaluating the impact of this ASU on its Consolidated Financial Statements.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This ASU amends the existing
guidance by requiring the recognition of all leases, including operating leases, with a term longer than 12 months on the balance sheet as right of use asset and lease liability and disclosing key information about the lease arrangements. The
effective date of this update is for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. The ASU offers an optional modified retrospective transition approach to apply
the provisions of the new standard. This approach results in the recognition of lease assets and liabilities in the period of adoption without requiring restatement of the prior period financials presented.
The Company formed a project team to evaluate the potential financial statement impact of the adoption of this ASU on the Companys
Consolidated Financial Statements. The project team analyzed existing leases, which primarily consist of real-estate leases for office space and other contracts which may be a lease or contain embedded leases. The Company has evaluated, designed and
implemented new processes and controls in order to meet the requirements to identify, report and disclose financial information regarding the Companys leases. In addition, the Company has designed a process to perform the necessary
calculations to derive the right of use asset and liabilities associated with each lease in order to support the requirements of the new standard. Further, the Company is implementing a lease software system for accounting and reporting purposes.
As of January 1, 2019, the Company expects to record a
right-of-use asset in the range of $78 million$91 million and a lease liability in the range of $122 million$142 million. The Company will adopt
this ASU on January 1, 2019 using the modified retrospective approach. The Company plans to apply the package of practical expedients in the guidance which, among other things, includes carrying forward the historical lease classification. The
Company plans to make accounting policy elections not to apply the new guidance to leases with a term of less than 12 months as well as to derive the incremental borrowing rate at the January 1, 2019 adoption date based on the remaining lease
term as of the adoption date.
2. REVENUE RECOGNITION
In May 2014, the FASB issued ASU 2014-09, Revenue From Contracts With Customers (Topic 606)
(ASC 606). ASC 606 supersedes the revenue recognition requirements in Accounting Standard Codification (ASC) 605, Revenue Recognition (ASC 605) . The new standard provides a five-step analysis of
transactions to determine when and how revenue is recognized, based upon the core principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects
to be entitled in exchange for those goods or services. The new standard also requires additional disclosures regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.
The Company adopted ASC 606 on January 1, 2018, using the modified retrospective method. The new standard requires the Company to
disclose the accounting policies in effect prior to January 1, 2018, as well as the policies it has applied starting January 1, 2018. Revenue is measured based on consideration specified in a contract with a customer. The Company
recognizes revenue when it satisfies a performance obligation by transferring control over a service or goods to a customer.
Periods prior to
January 1, 2018
The Company has contractual agreements with its customers that set forth the general terms and conditions of the
relationship including line item pricing, payment terms and contract duration. Revenues are recognized as earned (i.e., for transaction based fees, when the underlying transaction is processed). ASC 605 established guidance as to when revenue is
realized or realizable and earned by using the following criteria: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the sellers price is fixed or determinable; and
(4) collectibility is reasonably assured.
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